Obama’s State of the Union: No Jobs, but More Business Tax Cuts

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President Barack Obama delivers his State of the Union Address on January 25, 2011, on Capitol Hill in Washington, D.C. (NICHOLAS KAMM/AFP/Getty Images)

Not a word about the 25 million Americans still without jobs. Nothing about how to help the more than 7 million homeowners who have faced, or the additional 4 million who will soon face, foreclosures and evictions. Absolute silence about the dozens of states and hundreds of local governments in deepening fiscal crisis and approaching bankruptcy—and the hundreds of thousands of public employees who will pay for that bankruptcy with their jobs, wages, pensions, and health benefits.

OK, some vague references to infrastructure and alternative energy jobs—over the next 25 years. Paid for by Obam’s explicit reference to cut Medicare and Medicaid benefits by tens of millions of dollars.

But the most disturbing element of Obama’s State of the Union address last night was his firm commitment to cut corporate taxes even further, and thereafter to move on to ‘simplify’ the U.S. tax code in general—i.e. a code word in policy circles for further reducing top tax brackets which always results in tax cuts for the wealthiest households.

What Obama proposed in his address on Tuesday was a classic continuation of a supply side, ideological program focusing on business tax reduction, supplemented by various other measures to reduce business costs at the expense of consumers, workers, and others.

But the problem today is not excessively high business costs. It’s not a supply-side problem. Business has been cutting costs to the bone the past three years with massive layoffs, wage reductions, employee benefit cuts, hiring part time and temp workers, and implementing various productivity boosting measures.

Obama and Congress have further lavished tax cuts and subsidies on business at historic levels the past two years. The Federal Reserve in turn has reduced business costs still further by reducing interest rates to record low levels. The result of all this business cost reduction has been a rapid return to pre-crisis levels of business profits and an accumulated corporate cash hoard of more than $2 trillion. And none of this $2 trillion has been spent by business thus far to create jobs to any reasonable extent.

In his address, Obama praised the fact that business created 1 million jobs in 2010. But the majority of the 1 million were temp and part time jobs. And at that 1 million a year rate of job creation it will take 15 years just to recover the jobs lost in the recent recession. Yet Obama maintains Business needs further cost reduction assistance, and still more business tax cuts to ‘make them more competitive’.

The problem in the U.S. economy, now experiencing the most lopsided (and weakest) economic ‘recovery’ from any recession since 1947, is not too high business costs or insufficient supply side (business tax) stimulus. The problem is demand side—i.e. not enough income for the 90 million middle and working class households. That insufficient income means first and foremost not enough jobs. On Tuesday night, Obama said nothing of substance about how to create jobs today or even in the next one to two years. Job creation was relegated to the distant future, stretched out over the next 25 years.

The U.S. economy and households do not need a 25-year job creation plan. They need an immediate job creation program. And they need a definitive solution to prevent 10 million foreclosures. And the better get quickly a rescue of the states and cities, before the local government crisis sinks the municipal bond markets and subsequently precipitates another ‘subprime’-like financial implosion. Yet no mention of any of this in the State of the Union address, as if these weren’t the most serious issues confronting the US economy today.

In his Tuesday address Obama clearly followed in the footsteps of George W. Bush. Bush first passed more than $3 trillion in tax cuts for wealthy households between 2001-2003 by cutting capital gains, dividends, and estate taxes. (Obama last December extended the same for two more years). Bush then followed up in 2004 with several industry-by-industry specific corporate tax cuts worth another $1 trillion. (Obama now follows up with proposals to cut the corporate tax rate).

In 2005, Bush then proposed to revise the general tax code in his second term to make it all permanent. Obama and the Republican Congress will pass the additional corporate tax cuts this year, then move on to the general tax code revision in 2012 that will ‘simplify’ (lower) taxes on the wealthiest households before the next general elections.

On Tuesday Obama thus echoed the tired corporate refrain that ‘tax cuts create jobs.’ His new twist is that the tax cuts are necessary to ‘make U.S. corporations more globally competitive’ vis-à-vis their foreign rivals. In other words, the primary focus of the tax cuts is to benefit U.S. multinational corporations. As the argument goes, if they are ‘more competitive’ (i.e. if their costs are less), they will be able to get a larger share of global exports and sales, which will mean more investment and jobs in the U.S.

But for more than a decade now multinational corporations as a group have been steadily reducing jobs in the U.S., and will continue to do so. Obama’s corporate tax cuts will result in fewer—not more—jobs in the U.S., as corporations use the additional income to continue to invest in new equipment that will result in job displacement rather than new job creation.

More tax cuts for multinationals could also prove to have only a temporary effect at best at boosting exports and profits, and thus investment and jobs. The present period is one in which all the major global economic sectors—the U.S., the Eurozone, China, Japan, the Asian periphery, and BRICs like India and Brazil, are all intensifying their fight over the remaining global export pie.

Their respective, domestic economies have all been experiencing difficulty generating sustained internal economic recovery—except for China which has recently begun to slow its economy on purpose to deal with rising global speculation and internal inflation.

Japan has entered a double-dip recession. Asian periphery economies are rapidly slowing and some predicted to enter recession again. Like China, India and Brazil are slowing their economies intentionally as well, Growth in the Eurozone will slow, driven by its periphery nations’ financial instability. Global competition over exports is growing more intense. More currency fights are erupting. More protectionism is likely. And all over a global export pie that will to grow more slowly in 2011 and perhaps more so in 2012.

The newly emerging Obama-Big Business focus on relying on exports and multinational corporations to lift the US recovery to a sustained path is therefore a highly risky policy shift. It will not only fail to create jobs; it will likely fail as well to provide the main source for a sustained economic recovery that has eluded Obama to date.

For all who are not bankers, investors, or corporate managers and big stockholders or bond traders—we can expect more of the same for the next two years in a continuing lopsided economic recovery.

Jack Rasmus, professor of economics and political economy at Santa Clara University and St. Marys College, is author of Epic Recession: Prelude to Global Depression, and The War at Home: The Corporate Offensive From Ronald Reagan to George W. Bush. His forthcoming book (2011) is Obama’s Economy: Why Recovery Failed. What’s Next? Rasmus has published numerous articles in Z magazine, Critique, Amandla, Against the Current, the Dispatcher and other periodicals.

Am I the only one who noticed this statement from the SOTU speech:
“And last month, we finalized a trade agreement with South Korea that will support at least 70,000 American jobs. This agreement has unprecedented support from business and labor, Democrats and Republicans — and I ask this Congress to pass it as soon as possible. (Applause.)”
Last I heard, the AFL-CIO and every union but UAW were opposed to it: http://blog.aflcio.org/2010/12/09/afl-cio-and-other-union-statements-on-u-s-korea-free-trade-deal/#
Also, the slides in the "enhanced version" of the SOTU speech about Trade Agreements said "supported jobs" not "created jobs". Very slick way to give the impression that Trade Agreements create jobs when there is no evidence they do.Posted by seanp on 2011-01-26 16:11:53

We should forget about single-payer and begin the push for a full-scale National Public Health Care System which would provide the American people with "no-fee/no-premium, comprehensive, all-inclusive, universal health care--- publicly financed with funds cut from wars, publicly administered just like Social Security, and publicly delivered by doctors on the government payroll just like teachers, police and fire.
Forget about trying to bring any members of this big-business serving Congress on side; instead we should be building a new political movement and new political party with this real health care reform as the centerpiece of our agenda.
Then run candidates in all the closest races where Democrats will suffer the most.
This is the way to teach these betrayers of the American people like Obama who are beholden to Wall Street's interests a real lesson they will never forget.
Obama must be held accountable for his lies that he used to get elected.
This is called, "Punishing your enemies and rewarding your friends."
Plus, A National Public Health Care System providing the American people with free health care through 30,000 primary care community health care centers would create over ten-million new jobs... have you ever heard a politician out campaigning talking about, "jobs, jobs, jobs?"
Well, here is one way to create ten-million new jobs!
Peace = health care + jobs
Did you notice Obama never asked the American people a simple question:
How is this Wall Street war economy working for you?
As for the comments about politicians supporting the Israeli killing machine... even the most liberal members of congress support the Israeli killing machine--- including Bernie Sanders.
One more reason why we need a new political party headed up by real peace, social and economic justice activists--- let's give Obama and the Democrats a real people's peace ticket to attack--- Cynthia McKinney and Cindy Sheehan... I bet this would be a movement that Obama's bus can't run over without stalling.
Obama is a loser...
Anyone continuing to support Obama is turning the White House back to the Republicans.
Two wars...
U6 Unemployment over 17%...
Banks going bust...
Home foreclosures rising...
A huge health care mess...
Gas prices rising...
Electric rates rising...
Food prices rising to astronomical levels.
Does this sound like something a politician can take to voters and expect to win on?
A program and platform for real change...
Here is my idea of an alternative agenda:
* Peace--- end the wars in Iraq and Afghanistan and shutdown the 800 military bases
* A National Public Health Care System - ten million new jobs
* A National Public Child Care System - three to five million new jobs
* WPA - three million new jobs
* CCC - two million new jobs
* Tax the hell out of the rich and cut the military budget by ending the wars to pay for it all which will create full employment.
* Enforce Affirmative Action; end discrimination.
* Raise the minimum wage to a real living wage
* What tax-payers subsidize in the way of businesses, tax-payers should own and reap the profits from.
* Moratorium on home foreclosures and evictions.
* Wall Street is our enemy
Something to think about and consider around the dinner table this evening.
Alan L. Maki
amaki000@centurytel.net
218-386-2432Posted by alanmaki on 2011-01-26 13:58:44

If the left, liberals and other progressives have not figured out Obama by now they probably never will. The tragedy is that so many trade unionists feel obligated to continue supporting Obama despite his clearlh ant-labor actions.
This dependent behavior reminds me of the battered wife who continues to let hubby back after countless times that he has physically abused her. He keeps making promises to reform himself, but never adheres to his word. We in the labor movement must do as some battered women have done: CUT THE S.O.B. LOOSE!
Sisters & Brothers; now is the time for all good trade unionists to begin forming a viable alternative to the corrupt two party sham we are stuck with! Choosing the :lesser of two evils" is not a choice. Evil is evil and anything contrived to sugar coat this is clearly bogus!Posted by Pancho Valdez on 2011-01-26 13:13:17

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